Accounting
Trump’s economic confidants battle for sway on tax, Fed policy
Economic advisers in Donald Trump’s orbit are clashing over their favored policy ideas, a fight that is spilling into public view as they jockey for influence over the presumptive Republican presidential nominee’s second-term plans.
In recent weeks, informal advisers have floated ideas such as a proposal for a flat tax; penalties for countries that shift away from the U.S. dollar; and reforms to the Federal Reserve to give the president more control over the independent central bank.
The only problem with these ideas? Trump himself has not signed off on any of them and the unauthorized policy plans are annoying his top campaign staff.
While he has groused about the Chinese yuan, the high cost of housing or the Fed’s stubbornly high interest rates in passing conversations with advisers, he hasn’t voiced support for specific ideas to tackle these problems, nor has he requested a formal plan from his cadre of informal economic advisers,
The public jockeying and extreme ideas from various factions within Republican circles undercut the strategy of a remarkably disciplined campaign that has helped Trump cruise to the party’s nomination even as he’s mired in court cases. The plans, which often embrace fringe economic ideas, reinforce Trump’s political unorthodoxy, leaving voters — and markets — uncertain on what he would do with a second term.
Hannah Beier/Photographer: Hannah Beier/Bloom
These economic trial balloons have infuriated top Trump campaign officials and created distractions as they prepare for the general election. The campaign is consumed with managing Trump’s appearances at his ongoing criminal trial in New York City involving hush-money payments, and figuring out ways to generate political momentum from the days in court. They are also busy strategizing how to win key swing states in November and planning fundraisers, as they try to close a wide campaign cash gap with President Joe Biden.
One person familiar with the proposals compared the recent raft of economic ideas to Trump officials frequently appearing on TV when he was president, in the hopes he would catch their appearance and they could shape his viewpoint.
Policy plans
A handful of conservative think tanks have been generating white papers and collecting resumes to prepare for a return of Trump, including the Heritage Foundation, America First Policy Institute, Conservative Partnership Institute and the Center for Renewing America.
Trump is also receiving economic advice from former top officials, including director of the Office of Management and Budget Russ Vought, former U.S. Trade Representative Robert Lighthizer, former head of the Council of Economic Advisers Kevin Hassett and former National Economic Council director Larry Kudlow, along with wealthy donors including John Paulson and Scott Bessent, both of whom have been floated as potential candidates for Treasury secretary. Many of his key advisers don’t support ideas to meddle with the Fed.
For months, the Trump campaign has been trying to rein in proposals from various factions with limited success.
“Let us be very specific here: Unless a message is coming directly from President Trump or an authorized member of his campaign team, no aspect of future presidential staffing or policy announcements should be deemed official,” campaign managers Susie Wiles and Chris LaCivita said in a written statement to the media this winter.
Monetary policy battle
Whether and how to rein in the Federal Reserve’s power is one of the most divisive issues among Republicans. During Trump’s first term in the White House, he often tried to pressure the Fed and Chair Jerome Powell to keep interest rates low.
It’s an open question whether Trump in a second term would select Fed officials and other White House aides that would want to keep the central bank independent, said Nathan Sheets, the global chief economist at Citigroup Inc.
“Any kind of policy that eroded independence in an appreciable way would be greeted by the markets very vigorously and adversely and would be a source of great pressure and volatility,” he said. “I think it would be such a problem that any gains a political actor might think that they would glean from undercutting Fed independence would be so small compared to the potential costs that they might have.”
Trump isn’t the first president to try to exert influence over the Fed by advocating for rate cuts and more dovish policies.
Richard Nixon famously called for rate cuts, which made inflation roar back to life in the 1970s. In a 1984 White House meeting between President Ronald Reagan, White House chief of staff James Baker and then Fed Chair Paul Volcker, Baker pressured the central bank chief not to raise interest rates before the election.
Trump repeatedly criticized the Fed and Powell in 2018, when the central bank was still raising interest rates, and into 2019, even threatening to fire Powell. The Fed started cutting rates in the summer of 2019.
Fed independence
“We act like, ‘Oh my god, this could never happen.’ But it’s not like it hasn’t been attempted or succeeded in the past. It’s just that it was always being done through subterfuge because no one would have the gall to just come out and do it. But gall is not an issue for Trump,” said Stephen Myrow, a managing partner at Beacon Policy Advisers and a former George W. Bush Treasury official.
A few outside Trump advisers have discussed ways to give the president the power to oust Powell before his term ends in 2026.
Given the Fed’s independence as an institution, Trump cannot fire or replace Powell and instantly change monetary policy. All decisions made by the Federal Reserve require approval by the Board of Governors, so even one or two potential Trump nominees could be outvoted.
“The executive branch has already taken over monetary policy. Janet Yellen has used Treasury policy to usurp monetary policy and ease financial conditions. Her actions are one reason rate hikes have been ineffective,” Bessent, a Trump donor, said in an interview, refuting the notion Trump is seeking a major change. “President Trump and his economic team understand that the one thing that anchors medium and long-term rates is the Fed’s credibility.”
–With assistance from Stephanie Lai and Rich Miller.
The House unanimously passed four bipartisan bills Tuesday concerning taxes and the Internal Revenue Service that were all
- H.R. 1152, the Electronic Filing and Payment Fairness Act, sponsored by Rep. Darin LaHood, R-Illinois, Suzan Delbene, D-Washington, Randy Feenstra, R-Iowa, Brad Schneider, D-Illinois, Brian Fitzpatrick, R-Pennsylvania and Jimmy Panetta, D-California. The bill would apply the “mailbox rule” to electronically submitted tax returns and payments to allow the IRS to record payments and documents submitted to the IRS electronically on the day the payments or documents are submitted instead of when they are received or reviewed at a later date. The AICPA believes this would offer clarity and simplification to the payment and document submission process while protecting taxpayers from undue penalties.
- H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, sponsored by Rep. Randy Feenstra, R-Iowa, and Brad Schneider, D-Illinois, which would require notices describing a mathematical or clerical error to be made in plain language, and require the Treasury to provide additional procedures for requesting an abatement of a math or clerical error adjustment, including by telephone or in person, among other provisions.
- H.R. 517, the Filing Relief for Natural Disasters Act, sponsored by Rep. David Kustoff, R-Tennessee, and Judy Chu, D-California. The process of receiving tax relief from the IRS following a natural disaster typically must follow a federal disaster declaration, which can often come weeks after a state disaster declaration. The bill would provide the IRS with authority to grant tax relief once the governor of a state declares either a disaster or a state of emergency and expand the mandatory federal filing extension under Section 7508(d) of the Tax Code from 60 days to 120 days, providing taxpayers with more time to file tax returns after a disaster.
- H.R. 1491, the Disaster related Extension of Deadlines Act, sponsored by Rep. Gregory Murphy, R-North Carolina, and Jimmy Panetta, D-California, would extend the amount of time disaster victims would have to file for a tax refund or credit (i.e., the lookback period) by the amount of time afforded pursuant to a disaster relief postponement period for taxpayers affected by major disasters. This legislative solution would place taxpayers on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period.
“The AICPA has long supported these proposals and will continue to work to advance comprehensive legislation that enhances IRS operations and improves the taxpayer experience,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement Tuesday. “We are pleased to work closely with each of these Representatives on common-sense reforms that will benefit taxpayers, tax practitioners and tax administration and we’re encouraged by their passage in the House. We look forward to continuing to work with Congress to improve the taxpayer experience.”
The bills were also included in a recent Senate
The House also passed two other tax-related bills Tuesday that weren’t endorsed in the recent AICPA letter.
- H.R. 1155, Recovery of Stolen Checks Act, sponsored by Rep. Nicole Malliotakis, R-New York, would require the IRS to create a process for taxpayers to request a replacement via direct deposit for a stolen paper check. If a check is determined to be stolen or lost, and not cashed, a taxpayer will receive a replacement check once the original check is cancelled, but many taxpayers are having their replacement checks stolen as well. Taxpayers who have a check stolen are then unable to request that the replacement check be sent via direct deposit. The bill would require the Treasury to establish processes and procedures under which taxpayers, who are otherwise eligible to receive an amount by paper check in replacement of a lost or stolen paper check, may elect to receive such amount by direct deposit.
- H.R. 997, National Taxpayer Advocate Enhancement Act, sponsored by Rep. Randy Feenstra, R-Iowa, would prevent IRS interference with National Taxpayer Advocate personnel by granting the NTA responsibility for its attorneys. In advocating for taxpayer rights, the National Taxpayer Advocate often requires independent legal advice. But currently, the staff members hired by the National Taxpayer Advocate are accountable to internal IRS counsel, not the Taxpayer Advocate, creating a potential conflict of interest to the detriment of taxpayers. The bill would authorize the National Taxpayer Advocate to hire attorneys who report directly to her, helping establish independence from the IRS.
House Ways and Means Committee Chairman Jason Smith, R-Missouri, applauded the bipartisan House passage of the various bills, which had been unanimously passed by the committee.
“President Trump was elected on the promise of finally making the government work better for working people,” Smith said in a statement Tuesday. “This bipartisan legislation helps fulfill that mandate and makes improvements to tax administration that will make it easier for the American people to file their taxes. Those who are rebuilding after a natural disaster particularly need help filing taxes, which is why this set of bills lightens the load for taxpayers in communities struck by a hurricane, tornado or some other disaster. With Tax Day just a few days away, we must look for common-sense, bipartisan ways to make filing taxes less of a hassle.”
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